Value Analysis/Value Engineering: The Forgotten Lean Technique

James R. Wixson, CVS-Life, CMfgE

“Don't look now, but an old discipline value analysis is on the

comeback trail,” trumpets the introduction of a Purchasing Magazine
article, “Value Analysis Makes a Comeback”1 . Value Analysis and
Value Engineering are returning with a vengeance in the battle to
bring jobs back to America. Combined with the lean technologies of
Six Sigma, Lean Manufacturing and Automation, Value Engineering
completes a suite of tools dubbed Extreme Lean™ by Dave Dixon of
Technical Change Associates, Inc. a lean management consulting
firm based in Ogden, UT. Industry Week’s annual survey of U.S.
manufacturers included a vital bottom-line statistic. The dominant
concerns of manufacturing CEOs are 1) achieving lower costs, and
2) warding off foreign competition. In this context, “foreign
competition” includes U.S. competitors who source products
offshore. Six Sigma and Lean Manufacturing are not enough to turn this around, however.
This paper explores how Value Analysis/Value Engineering enhances the Lean-Six Sigma
Methodologies and how the concept of “Extreme Lean™” can help stem the tide of lost
manufacturing jobs in the U.S.

In today’s hypercompetitive world of manufacturing, companies in the U. S. today are

finding it increasingly difficult to compete with “off-shore” manufacturing firms in countries
such as Taiwan, the
Philippines, Korea,
Mexico, and China.
Between 2000 and 2003,
over 2.7 million
manufacturing jobs left
the U.S. to foreign
competition according to
Department of Labor
statistics2. Consequently,
the U.S. manufacturing
base has been rapidly
eroding since the late
1990’s. The methodology
that has been coined
“Extreme Lean™” by Dave
Dixon, President of
Technical Change
Associates, Inc. of
Ogden, UT., is an

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extremely effective suite of tools that promises to slow the exporting of our products and
jobs to other countries and even bring some of these jobs back to the U.S. Value
Analysis/Value Engineering is an integral part of this powerful suite of tools.
Dave Dixon believes companies can remain competitive.” But, to do so will require far
more aggressive cost reductions than have been collectively mustered to date. The
problem is that Lean and Six Sigma, at their best, can not provide the cost reductions
necessary to keep American manufacturers competitive in global markets,” according to
Dave. Being mostly reactive in nature, these tools are usually employed to solve existing
problems that may have been plaguing the company for years.
Mr. Dixon states that, “First, we have to acknowledge that, in the end, it’s all about cost.”
In more and more industries, excellent quality, on-time delivery, and superior customer
service are simply requirements to play. Companies should and will always try to use
these factors to set themselves apart from lower cost competitors, but quality, delivery and
service will only go so far in offsetting higher prices.

We have to focus on where the cost is. Because design features drive material costs, a
comprehensive cost reduction effort must attack the material cost embedded in the product
design. Value Engineering is a powerful and effective tool for attacking material cost
embedded in a product’s design as well as helps reduce variable overhead costs.
Additionally, it is proactive in nature in that it can be employed in the design phase of
processes and products that will aid in
avoiding serious problems later in
production.
Additionally, Lean and Six Sigma
address the labor and variable
overhead segments of the cost
structure, but have little or no impact
on material cost, the largest segment
of the pie. For the most part, design
features of the product drive material
costs, and the Lean/Six Sigma
methodology offers little in the way of
a tool kit for paring these costs.
Supply chain development programs
will reduce price (and material cost) to
a degree, but these efforts will always
be limited by the underlying
characteristics of the product design. 3
• Lean and Six Sigma address labor
and variable overhead, but have
little or no impact on material cost
– the largest piece of the pie.
• Supply chain development programs will reduce price (and material cost) to a degree,
but potential savings will be limited by underlying design characteristics.

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 VALUE ANALYSIS/VALUE ENGINEERING: THE FORGOTTEN LEAN TECHNIQUE
Value Analysis/Value Engineering (VA/VE) by its very nature is an intensive,
interdisciplinary problem solving activity that focuses on improving the value of the
functions that are required to accomplish the goal, or objective of any product, process,
service, or organization. Its goal is the systematic application of recognized techniques
that identify the functions of the product or service, establish the worth of those functions,
and provide only the necessary functions to meet the required performance at the lowest
overall cost. VA/VE’s focus on accomplishing the required functions at the lowest overall
cost sets it apart from the Lean and Six Sigma methodologies. VA/VE eliminates, or
minimizes wasted material, time, and product cost to which improves value to the
customer. This establishes VA/VE as a Lean Technique that has been forgotten, or
overlooked by companies striving to implement Lean and Six Sigma.
Lean Manufacturing views the cause of poor performance is wasteful activity. Lean is a
time-based strategy and uses a narrow definition of waste (non-value-adding work) as any
task or activity that does not produce value from the perspective of the end customer.
Increased competitive advantage comes from assuring every task is focused on rapid
transformation of raw materials into finished product. 4
Both VA/VE and Lean rely extensively on transforming operations into alternative forms of
visual information. In Lean, a Kaizen team will consider using a variety of visual analytical
tools to identify waste. Spaghetti diagrams, flow diagrams, bar charts, standard work
sheets, and production control boards, are all part of the Lean analytical lexicon. VE uses
function analysis and FAST diagramming to describe the functional relationship of the
product, process, or service and identify functions where the team should focus on
improving value. Creating by function is the high-octane fuel generating VE performance
and success.

VA/VE relies on a rigorous

interdisciplinary approach to
problem solving. VA/VE uses a
systems approach to problem
identification and solution. VA/VE
is function oriented and promotes
a “clean-sheet” approach that
supports innovative solutions.
Creativity is a key component to
the VA/VE problem solving
activities that promotes
“breakthrough thinking.” VA/VE
also uses a structured “job plan”
that promotes consistency in
application and helps assure
results. Increased competitive
advantage comes from the
identification of innovative ways to accomplish key functions at a lower cost with improved
quality and reliability. The function analysis systems technique (FAST) promotes a

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synergistic approach to problem solving that develops solutions far beyond that which only
an individual could produce. These attributes combine to produce some superior
advantages to problem solving when VA/VE is employed.
CONCLUSIONS
Combining the methodologies of Lean, Six Sigma, and VA/VE along with the eventual
implementation of automation, if applied properly, will provide the answer to the causes of
poor performance and high costs in our manufacturing industries that could stem the tide
of outsourcing jobs to off-shore manufacturing firms. Separately, these tools only provide
part of the answer to lower overall cost and improved quality. Together, they provide an
extremely powerful suite of tools to improve productivity, lower cost, improve quality, and
shorten the time-to-market. VA/VE is a powerful design methodology that harnesses
existing organizational creativity and knowledge resulting in superior innovative products
with unique customer benefits. Together, Lean, Six Sigma, and VA/VE increase customer
value by optimizing costs, quality and delivery.

Note: “Extreme Lean™” is a Registered Trademark of Technical Change Associates, Inc.

REFERENCES
1
Jim Morgan, Purchasing Magazine On-line, http://www.purchasing.com/article/CA339389.html, Value Analysis
Makes a Comeback, November 20, 2003
2
Bureau of Labor Statistics, "Employment, Hours, and Earnings from the Current Employment Statistics survey
(National)," (seasonally adjusted figures for total nonfarm employment, and manufacturing employment) accessed 11
Aug 2004.
3
David R. Dixon, PE, CPIM, Extreme Lean™: How to Keep Jobs in America, Society of Manufacturing Engineers,
WESTEC 2004 Proceedings.
4
James P. Womack, Daniel T. Jones., Lean Thinking, Simon & Schuster; 1st edition (1996)